«The emergency plan of UBS largely meets the requirements of the Banking Ordinance. However, the Credit Suisse crisis and its aftermath have shown that the emergency plan of a global systemically important bank (G-SIB) cannot, under the current framework, effectively achieve its purpose — namely, to ensure the continuation of systemically important functions while maintaining international financial stability — and must therefore be further developed,» the Swiss Financial Market Supervisory Authority (Finma) stated in its announcement on Thursday.

In other words: while the plan is legally compliant, Finma deems it ineffective.

Harsh Verdict from Finma

According to Finma: «UBS’s emergency plan cannot, for the time being, be considered feasible. Finma is further of the view that the emergency plan must be embedded as part of the extended set of options within UBS’s resolution plan. Only in this way could an exit from the market be applied as an equivalent alternative in a crisis.»

UBS responded: «As Finma confirms, UBS meets the applicable requirements to be able to be restructured in a crisis according to the preferred resolution strategy. As an additional safety net, the Swiss emergency plan would be available in an extreme crisis scenario. This plan is designed in line with current legal requirements to ensure the continuation and protection of systemically important functions in Switzerland, and is feasible for this purpose.»

UBS Points to Changed Business Model

According to the bank, the now-required further development of the emergency plan is consistent with the expansion of resolution options also demanded by the Parliamentary Inquiry Commission (PUK) and the Federal Council. «Even though it is not legally required today, UBS is already working on this in ongoing exchange with Finma and other authorities in Switzerland and abroad,» UBS stressed.

UBS also pointed out in its statement that since the global financial crisis it has fundamentally changed its business model and made significant investments to strengthen the bank’s resilience and ensure resolvability: «The combined balance sheet of UBS and Credit Suisse is now 60 percent smaller, and the strategy and business model have been significantly altered: in 2007, around 70 percent of the balance sheet consisted of investment banking, today it is around 30 percent. Since 2011, UBS has focused on wealth management and its Swiss universal banking business, which provides Swiss companies and households with capital, advice, and expertise. Between 2014 and 2019, the bank invested around 1,5 billion francs in its resolvability.»